- Continuing the trend of growth in 2003, Taiwanese server industry shipment reached another all-time high in the first quarter of 2004, hitting 503,000 units, 22.7% growth year on year, but weak sequential growth of only 1.2%. Although global economy has returned to form and corporate willingness to boost investment has increased, insufficient corporate confidence stymied equipment procurement. Shipment value grew 22.7% year on year to US$438 million, but witnessed a slight sequential drop due to a drop in full system share.
Value-line orders from international vendors remained the major driving force behind the growth of Taiwanese server industry shipment. Nevertheless, the intense price competition on value-line servers continued to suppress profit margins for Taiwanese makers. In response, Taiwanese makers have been working on shipping servers at higher levels of assembly. Recently, blade servers, with their high market potential and strong backing from major vendors such as IBM and HP, has become a focus of research and development for Taiwanese makers.
However, software and service are key in the server market, limiting the added value of hardware. Added that server market scale is a far cry from the level seen in the PC market, despite higher profit margins, overall profitability is difficult to achieve given heavy investment into R&D. Finding ways to create the greatest synergies with resources has thus become a major topic of concern for Taiwanese makers.
In the second quarter of 2004, with continued global economic recovery, growing corporate IT expenditures, and increased outsourcing by major international vendors, Taiwanese server industry shipment will see stronger momentum for growth; Taiwanese server shipment volume is forecasted to reach 542,000 units in the second quarter, 23.2% growth year on year, and a 7.7% gain sequentially.
The growing prevalence 64-bit processors in value line servers will be another development to watch in the second quarter of 2004. After AMD released its 64-bit CPU (Central Processing Unit) Operton, Intel will be rolling out the Nocona in the second quarter, a Xeon-based, dual-CPU that is forward compatible with 64-bit computing.